Why One Senior Living Company Sees Skilled Nursing Potential

By Alex Spanko | August 23, 2017

Amid the nagging uncertainty in the skilled nursing marketplace, some senior housing operators have moved away from SNFs entirely. Others, meanwhile, have said that if they could go back in time, they might reconsider their SNF strategy within continuing care retirement communities (CCRCs). But one provider believes the future of CCRCs includes SNFs as a key component — and not just short-term rehab facilities.

Kansas City, Mo.-based Tutera Senior Living sees long-term skilled care as a cornerstone of its business, providing its SNF units with a stable base of both residents and staff — and bringing an in-house option for existing assisted- and independent-living residents who require more care as they age.

The chain currently operates 51 communities in 11 states, and recently broke ground on a new rehabilitation center in Kansas City. The $21 million Northland Rehabilitation & Health Care Center will be part of a “virtual CCRC” when it opens, providing skilled care to residents of the company’s nearby assisted and independent living facilities.

The company operates on a purely fee-for-service rental model, with no upfront down payments — unlike some CCRCs that require large initial payments to cover future costs as residents move through the continuum of care. Tutera likened that payment structure to an insurance policy, in which residents end up betting that they’ll use services that they may not end up needing.

The straight fee-for-service strategy, in Tutera’s view, provides residents with more choice — and ups the ante for Tutera, as residents could hypothetically choose to leave at any time without incurring a serious financial hardship.

“It holds us to a higher standard, and it’s a product that not everybody’s going to build,” Tutera said.

SNF sweet spot

When discussing the CCRC model, Tutera gave the example of standalone memory-care facilities, which have experienced occupancy challenges in recent years.

“There’s obviously a great demand for memory care … but the specificity of those products narrows the market, and it limits the services you can provide, because you’re staying within that particular community,” Tutera said.

Instead, Tutera Senior Living has sought to provide a full range of services on single campuses, including long- and short-term skilled care, to meet what Joe Tutera said was strong demand from residents in the markets it serves.

“It opens up all sorts of all other options, broadens the market, and provides better choice for the market,” Tutera said. “It provides a much greater lifestyle for the resident, and the resident spouses and the family members.”

Tutera typically aims for a 90- to 120-bed SNF model, with a desired proportion of about 75 to 85 long-term beds. While admitting that short-term rehabilitation beds tend to have higher margins due to Medicare Part A reimbursements, he said that ongoing length-of-stay declines have created higher churn in rehab-heavy SNF units, putting a strain on the nursing staff and an operator’s bottom line.

“If you can add a mix of long-term care residents, it gives you a more stable census of lower-care residents to mix in with the higher-care residents, and a stable base of staff that can take care of those residents,” Tutera said.

“You’re just more efficient, and you don’t see the ups and downs,” he added.

A facility smaller than 90 to 120 beds, Tutera said, would leave the operator more vulnerable to census fluctuations and staffing inefficiencies.

“We wouldn’t do a CCRC with 30 skilled beds, because that’s a financial model that wouldn’t work. It would end up being a burden,” Tutera said.

Alex covers the skilled nursing and reverse mortgage industries for Aging Media. Outside of work, he reads nonfiction, yells at Mets games from his couch, and enjoys pretty much any type of whiskey or scotch — often all at once.

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